Amathus Drinks PLC v EAGK LLP & Anor

On a summary judgment application, the claimant must show a realistic, rather than fanciful, prospect of success. The court must avoid a mini-trial but may consider evidence reasonably expected to be available at trial.

A professional adviser’s disclaimer is relevant to whether responsibility was assumed, but it is not an automatic bar in every case. Continuing communications, the purpose for which work was undertaken, and the parties’ relationship may create a realistic prospect of establishing assumption of responsibility.

Where a defendant seeks dismissal for inadequate particularisation and holds documents needed to formulate the claim, the court may order disclosure for case-management purposes. Alternative factual cases may be pleaded if each is supported by evidence and is not speculative.

The buyers of a company’s shares brought contractual and tortious professional-negligence claims against the accounting firm and individual accountant involved in due diligence, preparation of accounts and a Completion Certificate. They alleged that the defendants negligently failed to detect pre-acquisition fraud which inflated the company’s net assets and purchase price.

The defendants applied to strike out the claim or obtain summary judgment. The contractual issue was whether the buyers were parties to the relevant engagement. The tort issues included assumption of responsibility despite an auditor’s disclaimer, adequacy of the pleaded breach case, disclosure needed to particularise that case, and alternative causation cases.

1. Summary judgment. The court applied the realistic-prospect test in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch). The court must not conduct a mini-trial, but must consider evidence reasonably expected to be available at trial.
2. Contract claim. The buyers had no realistic prospect of proving that they were parties to the September 2015 engagement. The engagement schedule concerned the company’s statutory audit, referred to the company’s members as a body, and contained a disclaimer of responsibility to others. It did not refer to the SPA’s completion accounts or the buyers’ rights. Summary judgment was therefore granted to the defendants on the contractual claim.
3. Tort claim and disclaimer. The assumption-of-responsibility test was founded on the reasoning discussed in NRAM Ltd v Steel [2018] 1 WLR 1190. The disclaimer was a relevant fact, not an automatic answer. Barclays Bank plc v Grant Thornton UK LLP [2015] 1 CLC 180 was distinguishable because the present case involved continuing communications during the audit process, including direct communications with the buyers’ solicitors. Those matters could support an assumption of responsibility up to the date of actual reliance. The tort claim therefore had an entirely realistic prospect of success and was not summarily dismissed.
4. Breach and disclosure. The claim was not to be dismissed merely because expert evidence supporting the breach allegations had not yet been obtained. Disclosure of documents held by the defendants was necessary to enable the claimants to understand and particularise the case. The order could be made under Practice Direction 57AD, paragraph 5.11, and, alternatively, under the court’s general case-management powers.
5. Causation. The buyers could not simply have decided not to complete, since the SPA had already been entered into. Their possible responses included rescission or proceedings for damages. Alternative factual cases could nevertheless be pleaded if each was supported by evidence and was not pure speculation, applying Clarke v Marlborough Fine Art (London) Ltd [2002] 1 WLR 1731. The defendants’ application was otherwise dismissed.